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Tell It to the Judge

The last thing you or your CEO needs is to be caught on the wrong side of the law

By Lisa Morgan

Go ahead. Make an attorney’s day. If you are violating a software licensing agreement, then you may someday find yourself in federal court. Individuals may be held criminally and/or civilly liable. Employers may be held vicariously liable. But, of course, that will never happen to you.

After all, who is going to find out? Software piracy is a lot like tax fraud. The chances of getting caught are pretty slim. On the other hand, software vendors are getting more sophisticated. And, there are entire organizations such as the Business Software Alliance (www.bsa.org) and the Department of Justice’s Computer Crime and Intellectual Property Section (CCIPS) (www.usdoj.gov/criminal/cybercrime/iplaws.htm) dedicated to identifying and prosecuting software pirates.

Companies selling software internationally are the most likely to fall victim to software piracy. Although some countries, such as the United States and the United Kingdom, have strict intellectual property laws, there are many more countries that do not. In some countries, copyright infringement is culturally acceptable. The Business Software Alliance estimates that companies lose US$11 billion annually to software piracy. And the problem is getting worse over time.

Software piracy occurs in a number of different ways, some of which barely phase average consumers. For example, individuals often think nothing of sharing software with friends and family. IT consultants sometimes install applications or operating-system upgrades on their clients’ computers as a value-add. And, of course, users often fail to read licensing agreements.

Then there are the real “bad guys,” distributors and manufacturers who sell counterfeit software. In cyberspace, there are newsgroups, Internet Relay Chat groups, Web and FTP sites and e-mail methods of piracy, to name a few. The Internet poses perhaps the largest threat to law enforcement agencies because software can be copied and distributed faster, cheaper and on a broader scale than its physical counterpart.

In response, prosecutors and plaintiffs are getting more aggressive and also more sophisticated. The Department of Justice has dedicated certain federal prosecutors to high technology and intellectual property crimes. BSA is teaming up with software companies to identify and prosecute offending parties around the globe. Although a number of efforts have focused outside the U.S., a growing number of arrests and convictions are taking place domestically, and that number will continue to rise. And so will the number of offenses.

Although the unauthorized sharing of software often is taken lightly, offenders and potential offenders should be well aware of the risks they are taking.

Violations of federal law can result in monetary sanctions, jail time or both. Offending parties can face prison sentences of several months to several years as well as fines ranging from thousands of dollars to millions of dollars, depending on the nature and degree of the offense. In addition to that, the software company that has been harmed by the activity can file a civil complaint.

In the past year, CCIPS has prosecuted and publicly reported a number of domestic software-related cases in which the estimated loss ranges from a few thousand dollars to $50 million. Some of the offending parties were convicted, sentenced and fined. Other cases have not been determined or the court found in favor of the defendant.

Brand-name software companies have been bringing civil suits against offenders. Microsoft prevailed against Illinois-based Logical Computers, which had distributed counterfeit copies of software in violation of the Copyright Act, the Latham Act and the Illinois Uniform Deceptive Trade Practices Act. Microsoft also won cases against Michigan-based Compusource and Massachusetts-based Crazy Bob’s discount computer products store for similar offenses.

But, of course, software publishers do not always win their cases.

Adobe, Lotus, Microsoft and Symantec collectively lost a case against South Sun Products, a wholesale jewelry distributor, for technical reasons. South Sun had apparently purchased single copies of certain software products and installed them on several computers. Microsoft et al. asked for an emergency temporary restraining order, which included a request for an immediate search of South Sun’s premises to prevent the destruction and concealment of evidence. The court ultimately held that Microsoft et al. had to do more than just allege that South Sun might conceal evidence; they had to show that South Sun would likely conceal evidence.

Software pirates of all types would be wise not to rely on such remote possibilities. Plus, ignorance of the law is not an affirmative defense to copyright infringement—the category under which software piracy falls. Just because you violate or circumvent a licensing agreement, it doesn’t necessarily mean you’re going to get caught. But if you do get caught, there likely will be a price to pay.